Green hydrogen will be able to compete with fossil fuels by 2028 to 2033, assuming a $30 per megawatt-hour power price in 2030, global energy consultancy Wood Mackenzie said Wednesday.
An increasingly dynamic low-carbon hydrogen market has seen a deluge of government support, corporate commitments, announced projects, and even bystander intrigue over the past 18 months, said Ben Gallagher, a lead analyst at Wood Mackenzie.
This activity amounts to a paradigm shift that will see green hydrogen, created from the electrolysis of water using renewable energy, emerge as a key element of the energy transition, he said.
Gallagher said a growing focus on net-zero targets favors green hydrogen.
"The last year has seen a decisive pivot towards decarbonization globally which is extremely positive for zero-carbon technologies," Gallagher noted, adding that recent announcements of net-zero targets from China, Japan, South Korea and Canada, along with the US recommitting to the Paris Agreement, show policy momentum to tackle global warming is now unstoppable.
As green hydrogen is a key beneficiary, Gallagher said electrolysis-based low-carbon production now makes up 67% of the overall pipeline for hydrogen.
- Policy and strategy are becoming focused on hydrogen
Gallagher said the EU’s Green Recovery Package announced last year specifically earmarked €150 billion for green hydrogen.
"This financial commitment was accompanied by specific targets for electrolyser capacity – 6 GW [gigawatts] in the first phase between 2020 and 2024, with 40 GW to be installed by the end of the second phase in 2030," he said.
As a direct result, Europe is currently driving growth, representing 79% of the overall low-carbon hydrogen pipeline, Gallagher said. However, he cautioned that such dominance would be temporary, as 17 countries, including Japan, South Korea and Canada, have announced a hydrogen strategy, roadmap, or vision in line with the global trend towards net-zero targets.
After a pandemic-related dip in the second and third quarters of 2020, investment in low-carbon hydrogen is once again on the up with at least $4.5 billion invested in the hydrogen market in the first quarter of 2021 alone, with 55 projects announced, he said.
The ability to manufacture ever-larger electrolyzers that can produce green hydrogen at scale is a key factor in enabling the rapid expansion of the sector.
Gallagher said this also has the usual benefits of scale in terms of bringing down costs. “Our own estimates are that green hydrogen will be competitive with fossil fuels by 2028 to 2033, assuming a US$30/MWh power price in 2030.”
-Ability to produce green hydrogen at scale is growing
WoodMac said that until 2019, global estimated electrolyzer manufacturing capacity was a mere 200 MW but has since jumped to 6.3 GW of current announced electrolyzer capacity with 1.3 GW added in the first quarter of 2021 alone.
Although Gallagher considers this growth a small percentage of the almost 1,000 GW of electrolyzer capacity needed by 2050, he said the exponential rate of growth in manufacturing capacity is clear and likely to continue.
-Hydrogen: A versatile, storable energy source
Another key advantage of hydrogen is that it acts as a versatile form of storable energy, according to Gallagher.
"So-called ‘power-to-X’ – turning electricity into green hydrogen – is crucial to maximizing the efficiency of renewable energy sources like wind and solar, which cannot be easily dialed up and down as required," he said.
Hydrogen is also extremely versatile, making it possible not only to decarbonize areas like transport and heating where renewable energy has potential but also to decarbonize industrial processes, which cannot be converted to electricity, he said.
Hydrogen can be used as a feedstock, a fuel, or an energy carrier and storage, and has many possible applications across the industrial, transport, power and building sectors.
It does not emit CO2 and almost has no air pollution when used. Therefore, it offers a solution to decarbonize industrial processes and economic sectors where reducing carbon emissions are both urgent and hard to achieve.
Hydrogen can replace fossil fuels in some carbon-intensive industrial processes, such as in the steel or chemical sectors, lowering greenhouse gas emissions and further strengthening global competitiveness for those industries. It can offer solutions for hard to abate parts of the transport system, in addition to what can be achieved through electrification and other renewable and low-carbon fuels.
By Sibel Morrow